Sesa Goa eyes set on another mine in Orissa

Anil Agarwal-controlled Sesa Goa, which had to cut its iron ore production  target by 10 million tonnes after failing to renew a mining contract for Thakurani mine in Orissa in November last year, has set eyes on another prolific iron ore mine in the state —  Kolha-Roida.

The mine is owned by Orissa Minerals Development Co (OMDC), a company under the ministry of steel and a subsidiary of Rashtriya Ispat Nigam Ltd.

According to highly reliable sources, Sesa Goa is one of eleven companies and the biggest of the lot to have bid for development of Kolha-Roida mine, tendered by OMDC in January this year.

The other bidders include companies like Hyderabad-based Ramky Infrastructure and the mining arm of Kolkata-based Adhunik Metaliks.

In January, OMDC had invited bids from prospective contractors to mine and transport iron ore from its Kolha-Roida mine, spread over nearly 255 hectares (ha). It is the third-biggest mine in the company’s portfolio in terms of area covered.

The Kolha-Roida mine was earlier under litigation with OMDC crossing swords with its previous contractor. OMDC officials could not be reached for comment.   

However, analysts said the invitation of bids suggests the company has finally got all the approvals in place and its legal dispute with its previous contractor is also settled.

“This would eventually pave the way for opening up of one of the biggest mines out of the six it had in Orissa that are largely un-operational,” said an analyst from a portfolio management company based in Mumbai.

This is even good for Sesa Goa, which could not renew its mining contract in Orissa due to non-agreement with its contractor and eventually had to curtail its annual iron ore production targets.

Sesa Goa, which is the country’s biggest private sector iron ore producer, had ambitious plans to be among the top four iron ore players by 2013 with a production figure of 50 million tonnes per annum by 2013, behind only the Big Three of iron ore —- Vale, Rio Tinto and BHP Billiton.

However, the plans went awry when it was unable to renew its third-party contract for the Thakurani mine in Orissa “on viable commercial terms on a long-term basis,” as the company had said in a statement on November 1, 2010. Consequently, it had to cut its ambitions by 10 million tonnes.

Sesa Goa started operating the Thakurani mine in Orissa from 1999 under a 10-year contract that expired in June 2009. It has since been operating the mine on short-term renewals, which could not take off beyond November 2010.

“Obviously, a miner like Sesa Goa taking up OMDC’s mines would be really good for company’s fortunes, but there is no clarity on whether the mines of OMDC are cleared by the environment ministry or not,” said Rahul Sonthalia, vice-president, MPA Finsecurities, a Kolkata-based portfolio management company.

He said it could take a lot of time for the mines to be operational in case they are still under the ministry’s scanner.

According to OMDC’s tender document, the contractors will be appointed for a period of five years, with a target to achieve 1.3 million tonne per annum (mtpa) in the first year, 1.8 mtpa in the second, 2.5 mtpa in the third and 3 mtpa in the next two years.

The tender document, however, does not talk about manganese ore production from Kolha-Roida for which the company had a target of 0.24 million tonnes in five years.

It wants contractors with expertise in composite mine work relating to “development, raising, sorting, crushing and screening, sizing, stacking and transportation and loading into railway wagons.” The approximate value of the work is Rs150 crore and the tenders would be opened on March 14, the tender document said.